Economic Fundamentals Remain Strong, Inflation Driven by Structural Factors

Several key economic factors including a strong labor market, high consumer demand, and historically high household savings (that would cushion any potential downturn) contribute to the sense of hope for 2022. Unemployment stood at 4.2 percent in November, compared with the pre-pandemic 3.5 percent in February 2020. The stubborn mismatch between job vacancies and the unemployed suggests that the natural rate of unemployment has shifted and long-term investment in public goods is the only way to realize unlocked GDP potential. The number of unemployed workers stood at 6.9 million, almost two million more than the pre-pandemic level in February 2020.